Risk measures and their applications in portfolio optimization
Birbil, Ş. İlker and Frenk, J.B.G. and Kaynar, Bahar and Noyan, Nilay (2008) Risk measures and their applications in portfolio optimization. In: Gregoriou, Greg N., (ed.) Measuring Financial Risk: A VaR Approach. The McGrawHill Publishers, New York. (Accepted/In Press) AbstractSeveral approaches exist to model decision making under risk, where risk can be
broadly defined as the effect of variability of random outcomes. One of the main approaches in
the practice of decision making under risk uses meanrisk models; one such wellknown is the
classical Markowitz model, where variance is used as risk measure. Along this line, we consider
a portfolio selection problem, where the asset returns have an elliptical distribution. We mainly
focus on portfolio optimization models constructing portfolios with minimal risk, provided that
a prescribed expected return level is attained. In particular, we model the risk by using Valueat
Risk (VaR) and Conditional ValueatRisk (CVaR). After reviewing the main properties of VaR
and CVaR, we present short proofs to some of the wellknown results. Finally, we describe a
computationally efficient solution algorithm and present numerical results.
Keywords: Elliptical distributions; meanrisk; valueatrisk; conditional valueatrisk; portfolio
optimization Item Type:  Book Section / Chapter 

Uncontrolled Keywords:  Elliptical distributions; meanrisk; valueatrisk; conditional valueatrisk; portfolio optimization. 

Subjects:  Q Science > Q Science (General) 

ID Code:  9657 

Deposited By:  Nilay Noyan 

Deposited On:  07 Nov 2008 16:50 

Last Modified:  19 Jul 2019 14:05 

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